Almarai’s Q1 2020 net profit meets forecasts, says Aljazira Cap

Saudi Almarai’s Q1 2020 net profit of SAR 383 million came in line with Aljazira Capital’s estimates of SAR 367.6 million.

“We believe, that the spread of COVID-19 has supported the company’s overall volumetric sales, mainly foods, long-life product and poultry. Based on empirical evidence the company has also stopped giving regular discounts which in-effect will support the top-line growth and margins,” Aljazira Capital said in a recent report.

Food service sales (HORECA) that account for almost 13% of the company’s total sales could be impacted due to limited operation of restaurants as a result of curfew due to COVID-19.

“However, we believe that the company would be able to mitigate the impact by improving its presence in other trade channel and product categories,” the report issuer added.

The dairy producer’s ability to continue focusing on cost and gaining market share are the key support for future performance. Moreover, continued performance improvement in the poultry segment, food and recovering bakery segment are the key support for higher operating efficiency.

Although the company was able to maintain its market shares in some categories; margins in fiscal years 2020 and 2021 may be under pressure due to imported alfalfa.

Aljazira Capital affirmed its “neutral” recommendation on Almarai, setting the stock’s price target at SAR 50.